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tv   Fast Money  CNBC  December 11, 2015 5:00pm-5:31pm EST

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junk bond market that is collapsing. >> it is not collapsing, it is distressed debt and blood in the water. people want this to happen. >> and not to mention what is happening in their pockets is distressing too. >> brian sullivan is back now with "fast money." >> live from the nasdaq market side overlooking times square. i'm brian sullivan in for melissa tonight. your traders, tim seymour, brian kelly, and guy adomi. tonight, karl icon says the market is a keg of dynamite, and bank of america agrees. what one high yield analyst is saying the credit market is about to do and why the panic may get worse. from fang to dang. one of wall street's biggest bulls say big flying high cap
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stocks are about to get bit. but they have rattled and we're going to find out why. later on, are you worried about more volatility than we already have. we have a group of stocks that could be your ultimate shelter trade. it is big show ahead, everybody. we start to the market. the down closing down 310 points. that puts it down more than 3% just this week. that is one of the worst weeks for the year. why else? the collapse of the price of oil. here is the big question. crude oil's collapse becoming a larger event or perhaps a credit event. >> i think that is what we're seeing. we have seen the high yield market, junk bonds, distressed bonds, we have seen that market sell off significantly. that is why you're seeing all of these gates being put up.
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that is starting to spread to the rest of the market. now we have consumer services, we have retail, we have tech, we have materials. all of those junk bonds are trading at distressed levels. this is starting to spread. it is starting in oil, and it is starting to spread to the rest of the market. >> do you think it is mostly liquidity? the fact that there is so much regulation on these banks right now, is it the liquidity issue that people are fearful of? >> it is a double whammy. their balance sheets are locked up, and the restrictions they put on the banks. >> so the stats are that corporate debt has almost doubled since the crisis, and broker dealer balance sheets have been cut in half. you are seeing default rates tick up a little bit, and if the economy -- >> all rates are still near record lows.
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>> of course, they're ticking up. >> i agree that we had a credit moment, front page of the journal has this big article, welcome, brian sullivan by the way, but let's put this in perspective. i'm very concerned about liquidity. about a growth scare leading to a credit scare. right now because we have issues in the energy market does not necessarily mean that you're going to see dominoes, the leverage in the system, that is in corporate america is not in the same place anywhere near where we were in 2008, so let's drop some sanity on this conversation. we have a difficult environment. i agree. we don't know why this time is different and it is because liquidity conditions are different. >> that can impact the acts. we have had buy backs and dividen dividends, and a guy last night was talking about how the oil companies still have to borrow money to pay dividends.
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>> the bottom line is this, if you're a midide oil and gas firm, you cannot come no the market right now with debt unless you're willing to pay 17 to 20% yield and even then, it will be tight. i just wonder, is this just an oil and gas thing? that is a separate problem. i bet if you're micro soft, you can probably come it market at 1% right now. >> and to be clear, one of the things that will change this, it will be somewhere around 26 billion next year. we're getting to a place where i think a lot of the are very good news for oil in is something that will creating that bottoming time. i thought oil would be bottoming at this point, but i think this is what you want to see. >> i mean, i'm sure that carl
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wants to warn people and there is something else going on there as well. what has been warning this is the bond market now for the last 18 months. yields are stubbornly low. the transports, the dow transports have been signaling this for the last year. it has been in a steady decline for the last 15 months. so although, yes, we're talking about oil and credit today, there have been other things going on that have been a -- >> we're getting some trades, and what is amazing, even as corporate debt sales go to records, there is fewer people to do trading of more bonds. let's get into some more ideas. what do they do? >> i say continue to stay short, ily tell you that until the
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marginal demand is coming from the u.s., there is no way we're seeing a bottom in energy. it will take a while for that to occur. that's when you step in and you can cover that short. in the meantime you stay short and people will make a tremendous amount of money on this. >> you can also, probably the better trade here, is to look to be short the s&p 500. i know that the options volatility prices have increased recently. >> is it wort worth the premium? >> i think it is at this point. >> look at where we were back in august and september. >> that was the time to buy. >> one of the things also characterized this week is the dollar pulled back 3.5%. you have seen unwind of trades. so what happened? what you will see more of is the yen will appreciate. it has not appreciated enough this week. they got a huge boost from yen
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exports. ewj, i think this is a trade, this is fast money. you're in a place here where japan has outperformed t rest of the major indices. >> earlier today, carl icon said this about the dangers of the high yield market. >> the high yield market is just a keg of dynamite that sooner or later will blow up. and i did say, and i said it to larry and i have respect for larry, that black rock is a -- the etfs of black rock and these other companies are very dangerous. there is no liquidity. >> he so is it right? is it about to explode like a keg of dynamite? one of the few analysts who called this year's slide, good to see you on fast money. the keg of dynamite analogy,
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let's use that. it is a big keg of dynamite, the wick is burning. it becomes a credit event outside of oil and gas, or someone puts it out, and this is just a contained event. >> there is no in between? i see it as -- i see an in between mode, right? i'm certainly not bullish on high yield. we have been the bears on the street for going on 15 months. i continue to be today. we're calling for negative total returns next year, but it doesn't have to be boom, right? this is something that can be more painful. and the worst case scenario, it is not how carl characterized it. the worst case is that it is death by a million cuts. >> i'm going to quote you back to you. about half of the junk bonds out there yield around 4.5%, which
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is not that much. the other half yield over 10%, why the huge divergence? >> a lot of people have been saying this is just a commodity story. and the commodity sector is unloved right now. and they believe the high yield general should be okay. the rest of the market is doing okay. i'm more cautious because of that. i take issue with that. leverage and noncommodity high yield is the highest it has ever been. corporate america as a whole, on the consumer balance sheet is fairly healthy, high yield company balance sheets are not that healthy even outside of commodities. >> since we talked mainly about stocks here, the one linkage that i have seen, and i'm curious if you have seen, is that high yield investors are
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using the s&p 500 etf to hedge these portfolios. so when you see high yield go down it has the potential to bring the s&p 500 down. is that what you're seeing in those markets? >> i certainly see some of that. less so from the mac row and hedge fund community. traditionally, the russell and high yield is more linked and correlated than the s&p and high yield. the time period i think we're very similar right now is 99 to 2,000. so pre dot com bust. the fed hiked, you had a 50% fall in oil prices. asia currency devaluations. erratic gdp growth. a lot of similarities between june 99 and june 2000.
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the equity market returned negative 1%. we have seen situations like we have today where there is bifurcation between stocks and bonds if can happen and it will be driven by a select group of stocks, but it can happen. and we have seen that happen. i think the russell will have a harder time. it is more correlated with high yield. >> we're watching small caps and high yield. you're on the record that rare doesn't mean impossible. we can see stocks do well. have a great weekend, buddy, thank you for joining us. >> it is an interesting point. we tend to look at the bond market as the smarter market. but myself makes a great point, just because bonds do one thing, it doesn't mean that stocks have to do another. >> absolutely. for the last year, stocks have done something different than what the bond market is saying. what is the trade then? levels?
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what are we looking at? the high yield etf. at the end of 2011 it bottomed out around 80 or 80.5. today it needs to recapture 82 and then you have a double bottom. the s&p, the critical level to look to is 2020. >> all right, on deck, one of wall street's biggest bulls sounding the alarm on a group of stocks that you may own. find out what tom lee says could know dive in the new year. plus, a nightmare on the street of streams, but we have four stocks that you might want to hide out in. those names may surprise. . more fast money after this. santa has a magic snow globe for every family. and this year, look at what he put in our driveway. the lexus december to remember sales event is here.
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lease the 2016 es350 for $349 a month for 36 months and we'll make your first month's payment. see your lexus dealer. big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on. (laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern. ♪ the lexus december to remember sales event is here. lease the 2015 gs350 with complimentary navigation system for these terms. see your lexus dealer.
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welcome back to "fast money," everybody. take a look at the shares of
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these. they're a falling hard. now one of wall street's biggest bulls overall says there could be more pain ahead for this group. we have tom lee. we used to call these the fang stocks, now the fana. why are you so nervous on this? >> well, one, you know, it's been a very important group of stocks for portfolio manager this is year. i think it really saved a lot of people's bacon. one of the challenges is that when you look at history, groups and especially concentrated performances like this can rarely push to the following year. two of the fang names were the worst stocks in 2014. >> so i'm curious, if these stocks break, right? they have been bent, does that change your bullish view on the market? you have been bullish for awhile now. >> you know what, in our report we analyze fang and it turns out
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when f.a.n.g. performance is poor. i think next year if you see f.a.n.g. toppled, them you will see value outperform. these are blue chip companies. it is just after an 86% move and really elevated p.e.s investors might find places town vest elsewhere. >> you were very joet spoken, people were starting to say look, it is the next level wt is happening now? are you in the same place? you can make a argument from a momentum perspective. it was almost oversold. >> almost every meeting we have these days we agree the market is on a knife edge here if is tipping into no growth, or
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tipping back into reflation. so next year do you want to own value over growth? you want to buy the stuff that has been garbage, but it means u.s. consumers are doing better, investment picks up, china is not dieing, and it's a big value trade. >> big value trade next year, buy what's garbage, we assume you don't mean waste management. >> let's talk the about this, do you agree with that, it will take some stocks and holding your nose. >> go back to google for example. they're impurveous to the oil move. i think there is a reason to buy into google and i feel the same way about netflix. unfortunately the support level is around $90.
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>> value? >> absolutely. >> value? >> it depends what you mean on value, but i think the stock is value. >> i'm dropping shade on you. >> the concentrated effort for these names, and we saw in bio tech it continued for five years. i look at amazon and i say momentum will continue to work. facebook has a risk because there is cost structure there. r i don't know if it can over the near term. i look at netflix and i say they miss numbers or their subscriber guidance. and google, under valued. the stocks should be bought here and they have an event coming up here in the fourth quarter. >> tim is dropping shade. as we go to break, another look at the sea of red that was wall street. the dow closed down 310 points. oil got crushed. that is a daily headline now.
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more coverage on the selloff coming up. i'm brian sullivan. let me do that again, roll the prompter. i'm brian sullivan and you're watching "fast money" on cnbc. in the meantime, here is what else is coming up. that is what traders are looking for. >> if youd can't take the volatility, you have the perfect place to hide out. plus, as the markets tumble, is it too late to buy protection? maybe not, we'll show you how later in the hour. faced with horses that needed feeding and a texas drought that sent hay prices soaring, the owners had to act fast. thankfully, mary miller banks with chase for business. and with greater financial clarity and a relationship built for the unexpected, she could control her cash flow, and keep the ranch running.
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we are less than one week away from the release of the new far w "star wars" movie. is there any way that it can live up to all of the hype? >> expectations could not be higher, even if the "star wars" the force awakens it would be
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hard to reach expectations and here is why. take a look at the two biggest movies of all time. "avatar" and titanic. their openings were relatively modest. so why is that? holiday shopping keeps people out of theaters as does holiday trouble. less than a fifth. that is not to say that star wars, the force awakes are huge. it was a full month before it hits theaters. analysts project opening weekend forecasts ranging from $170 million to $240 million in the u.s. alone.
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"jurassic world" set a record but that was in june. people have been lining up if for no reason than to be part of the excitement. so there is no question that there is a huge amount of buzz about the film, but it is the weeks that follow opening weekend that could make it a record breaker and disney hopes that it will signal the families home for the holidays. >> we want to talk about names that maybe have what we call, "the force." tim seymour -- >> this is trofrl. they have walmart that is a major disrupter. if you look at where the stock is, we built a base. that is defensive here. >> the worst firming stock? >> i like reynolds america.
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i think they have a new earnings brand. they can move into a 22 multiple easily. that is roughly $55 a share. >> for me, it is one that i held for a long time, that is an under performer, and that is blackberry. we start to see the car coming into the online car, black berry is right in the middle of all of that. >> i love true stories. they're the best -- >> secular tail winds, not a crazy evaluation. a stock going from 20 to current levels. they just announced their stock buy back. time now for the final trade, a volatile ride for stocks next week. >> the news yesterday, i'm still a seller of twitter, i think it
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is going below $20. >> less long on the u.s. dollars and a buyer -- >> silver wheaton, i'm in brian's camp. >> thank you, if we don't see you again, merry christmas. that does it for us here at "fast money." now, "options actions" begins with this guy after the break.
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coming to you live from times square. i'm brian sullivan and the traders are getting ready. while they're doing that, here is what is coming up. that is what stocks did today, but fear not, we'll tell you how you can still buy protection on your portfolio, plus -- >> that is what crude is doing, and it


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